Recently the European Union (the Union) has adopted a new Regulation, where it laid down a set of rules to manage financial responsibility in disputes between investor on the one hand and the Union or a Member State on the other. The main objective of the new EU Regulation – the full name of the document is the Regulation of the European Parliament and of the Council (EU) No 912/2014 establishing a framework for managing financial responsibility linked to investor-to-state dispute settlement tribunals established by international agreements to which the European Union is party – is to distinguish financial responsibility of a Member State and of the Union.

This Regulation relates to disputes to be decided by arbitration tribunals.

This Regulation applies to investor-to-state dispute settlement conducted pursuant to an international agreement to which the Union is party, or the Union and its Member States are parties, and initiated by a claimant of a third country.

The essential rules provided by the Regulation state that where the Union, as an entity having legal personality, has international responsibility for the treatment afforded, it will be expected, as a matter of international law, to pay any adverse award and bear the costs of any dispute and, in turn, the Member State concerned should bear the financial responsibility where the treatment concerned is afforded by that Member State.

The Union should always act as the respondent where a dispute exclusively concerns treatment afforded by the institutions, bodies, offices or agencies of the Union. Accordingly, where a Member State would bear the potential financial responsibility arising from a dispute it is appropriate that such Member State acts as a respondent. Only in exceptional circumstances the Union itself acts as the respondent in disputes involving treatment afforded by a Member State.

The Regulation shall apply only in respect of disputes where the submission of a claim to arbitration has been lodged after 17 September 2014, and that concern treatment afforded after 17 September 2014.

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